When passionate investors talk about who the world’s best stock market professionals are, high profile names like Warren Buffett, Peter Lynch, George Soros and Bill Miller get uttered with reverence.

But have you ever wondered whether the guy living next door has—with his own personal investment account—destroyed the investment returns of the highest rating professionals?

I mean, how would you even know?

Meet Charles Kirk, an investor I first read about in Dick Davis’ fabulous book, The Dick Davis Dividendwhere Davis heaps praise on the youthful Kirk as the Anti-Cramer.   Where Jim Cramer is loud and obnoxious, Charles Kirk is humble.  Where Cramer’s public stock picks are relatively underwhelming,  Kirk’s annual performance is simply mind-boggling.

As a man who has beaten the S&P 500 index for 17 straight years, and fully documented it with his online blog, The Kirk Report, he has been profiled in Barron’s, Time Magazine, and Forbes.

It’s a pleasure to have the opportunity to interview him for this post:

Q1.  Andrew:
Charles, if you had a niece or nephew graduating from college, and you could recommend two finance books for him or her, what would they be and why?
A.  Charles Kirk:
 Assuming they are not interested and have no experience in the market, I would probably send them copies of The New Coffeehouse Investor by Bill Schultheis and Financially Stupid People Are Everywhere, by Jason Kelly. Both are mainstream and would offer a lot of helpful advice for people at that age just starting out their careers.

Q2.  Andrew:
What does your portfolio allocation look like?  Do you have 100% stocks, or do you ever have a bond component?

A.  Charles Kirk:
Most of the time you’ll find [I own] a handful of stocks or ETFs. I don’t do bonds as my time horizon is short.

Q3.  Andrew:
You have a great track record against the S&P 500 index.  How many years have you beaten the market?
A.  Charles Kirk:
Every year since 1993. But, remember as I always say, past performance doesn’t mean anything. We are only as good as our next trade, next week, next quarter, next year and so on. And, I will be the first to tell you that I have been luckier than I have been smart.

Q4.  Andrew:
I’ve read that you are writing your own finance book.  What are some of the key concepts you are going to write about—concepts you feel people can really benefit from?

A.  Charles Kirk:
It won’t really be a finance book per se, but rather a book containing all of the experiences and research I’ve learned and collected throughout my career. The idea is that someone who has read it would have a distinct advantage in the marketplace even when read many years down the road.

 One of the reasons I’m heavily involved now in a voluntary mentorship program I started last year is to really understand how others think and learn so I could do a better job as an educator at my website and hopefully later that will be reflected also in my book.

 The plan is to retire the very day the book is published – around 11 years from now.

Q5.  Andrew:
  If you were to boil down three common investment mistakes that people make, what do you think they would be?

 A.  Charles Kirk:
There are many more than that, but these are the three that come quickly to mind:

1) Far too many don’t have a coherent strategy that they can really understand and stick to when the pressure is on.
2) Far too many invest only with their emotions and egos rather than their brains.
3) Far too many chase performance and investment fads/trends too late in their respective cycles.

Q6.  Andrew:
Do you have any particular investments (or investment moves) that you’re particularly proud of making, and why?

A.  Charles Kirk:
I suppose the times I’ve been proud of myself the most are the very times I’ve been patient and had to hold lots of cash when my approach wasn’t working as I thought it should. Knowing when to be sidelined and patient is more important than most realize. Like Warren Buffett, I’m always looking for the fat pitch and, if I don’t see it, I don’t take a swing.

Q7.  Andrew:
What are your biggest investment “lessons learned” over the years and how do you apply those lessons to avoid repeating similar mistakes?

A.  Charles Kirk:
First and foremost, we all must understand our own limitations. I have them and so do you and everyone who reads this interview. Limitations can be a variety of things (lack of skill, lack of time, lack of knowledge, lack of patience, lack of insight, lack of understanding, and so on). 

Once you come to grips with your own limitations, the next thing is to create a strategy toward investing (and trading) that takes those limitations into full account. For most people I encounter, that means just matching the market’s performance using a few index funds as the right approach until their limitations are reduced or eliminated entirely.  After all, until you’ve proven that you can match the market’s performance consistently, you’ll never really understand how to beat it. And, for many, that’s their key objective. 

My job is to help people understand what limitations they have and then figure out new ways to work with those who want to overcome them if the desire and motivation is there to do so.

Q8.  Andrew:
Are there any investors that you admire?  If so, who are they and what do you admire about them?

A.  Charles Kirk:
While I have tremendous respect for many people in this industry, the people I admire the most are those who you unfortunately never hear about until they die. You know the stories.   Some school teacher, for example, after saving and investing their whole life and who managed to leave millions through savvy investing on a meager teacher’s salary.  Those are the stories that inspire me more than anything because these people were able to earn a living the hard way by helping others for little money AND at the same time were able to squirrel away enough money and invest it well so that the fruits of their labor then made a positive impact on other people’s lives for many years following their passing. These are real heroes in my view. Nothing could be better than that. What I do for a living pales by comparison. 

Q9.  Andrew:
Have you ever been asked to run a mutual fund or a hedge fund?  And if not, would you ever be interested in doing that?  Why or why not?

A.  Charles Kirk:
I’ve been asked to join a hedge fund on a couple of occasions. But, speaking of limitations, I learned many years ago that I “don’t play well with others.”  Therefore, to go and work for someone else would not be in my best interest or anyone else’s for that matter.

I like doing my own thing, the way I like to do it. The personal freedom of having no one but myself as a boss is something that is worth more to me than anyone could afford to pay me at a hedge fund.  While I don’t make nearly as much as the hedge fund pros, I make enough. In addition, I have something none of those guys have which is a tremendous amount of personal and professional freedom to do what I want, when I want.

Q10.  Andrew:
How do you control risk in terms of size of positions, closing out at the end of the trading day, and deciding when to let go of a losing position?

A.  Charles Kirk:
I control risk in the following ways:

 1) Selective positioning – I only go for situations which are low risk, but offer high rewards. In essence, the stock or ETF must have 10 points upside and only 1 point downside if my research and analysis is correct.  In addition, I’m trading ETFs more and more both because of the inherent diversification element and  because there is no event associated risk with ETFs.

2) Careful entries – I try to buy at the point where the risk/reward is tilted heavily in my favor.  This will vary depending on the overall market condition, but generally I only look for really good setups.  I don’t trade for the sake of trading.  Most of the stocks I trade I’ve been hunting for an entry point for weeks, if not months, prior to the entry.

3) Position sizing – I scale position sizes based on market conditions.  For example, I’m more aggressive when conditions are good, very conservative when conditions are poor.  I also only add to winning positions and will often pyramid (or scale up) in positions that prove their worth.

4) Stops – before any trade is made, I know my exit point AND I stick to it. My goal always is to lose very little when wrong, but make as much as possible when correct.  Yes, I’m wrong a lot, but the key here is that when I am, I don’t usually lose much.  That’s the key.

Q11.  Andrew:
Is there a benchmark or standard that tells you that you’ve had a good period or not?

A.  Charles Kirk:
Let’s put it this way:  5% per week (or 1% per day) is my trading goal. However, I don’t beat myself up when I fall short of that target if market conditions are poor.

As any experienced trader will tell you, even the best trader in the world who has plenty of excellent tools, strategies and experience will suffer when market conditions are poor. Understanding that, and adjusting to it, is a big part of trading well.  As traders, we never have any control over the market, but we have 100% control over ourselves. It is the latter part that most struggle with.

Charles, thanks very much for the opportunity of the interview.  With my fingers crossed, you’ll be able to keep an eye on the comments that follow and perhaps, offer your two cents to responses.

Again, good luck with everything—and thank you!